In the post Mobile Payments for Newbies – An Introduction, an overview of mobile payments and how mobile payments are made is provided. The post also covers the concept of ‘banked’ and ‘unbanked’, and highlights how mobile payments are meeting the needs of consumers and businesses in these 2 very distinct models. This post builds upon this foundation, and summarises a lot of the very useful detail from the recent EPC Overview on Mobile Payments.
The EPC Mobile Payments overview is a must read for anybody interested in mobile payments both within the SEPA zone and outside of it. The overview identifies various mobile payment, mobile wallet and mPOS (Mobile Point of Sale) initiatives over the 7 month period, November 2013 – May 2014. In this post, I will not be going through the details of the initiatives rather highlighting the overall concepts. For full details and examples, I recommend reading the EPC Mobile Payments Overview.
Mobile Payments & the EPC:
When it comes to payments, the European Payments Council (EPC) is the coordinating and decision making arm of the European banking industry. The EPC aims to standardise payment processing within the SEPA zone through the development and promotion of best practices and utilising industry standards. The EPC represents the key stakeholders including banks, payment institutions and of course the public.
In terms of Mobile Payments, the role of the EPC is currently aspirational. The EPC’s vision of developing, promoting best practice and standards covers all payment instruments in the SEPA zone. So the objective of mobile payments is to ensure that payments initiated from mobile devices leverage existing SEPA EPC Scheme Rulebooks, the SEPA Cards Framework and global standards as much as possible.
The current focus area for payment technology is the desire to replace cash based transactions, for both business and personal payments, with another more convenient, accessible and secure method. The EPC states that mobile phones have “achieved full market penetration” and as such they are an ideal channel for payment processing.
There are 2 types of Mobile Payments:
- Contactless Payments: The payer and recipient of the payment are in the same location. In this instance the payment is typically completed using contactless radio technology such as Near Field Communications (NFC), bluetooth or infrared
- Remote Payments: The payer and the recipient of the payment are in different locations. Here the transaction is processed over the telecommunication network using either GSM (Global System for Mobile communications) or the internet.
What is a ‘mobile wallet’, sometimes also referred to as a ‘digital wallet’? Lets think about the physical wallet in your pocket right now. It typically contains some kind of identification (to identify you) and contains access to cash. Now the cash could be in a variety of forms, either physical coins and notes, or a debit/credit card which enables access to an account which in turn gives you access to cash funds. A digital wallet is essentially the same.
The mobile or digital wallet will identify you, the wallet holder. This identification could be in a variety of forms such as your national identification number, your photo plus address information. Next the digital wallet will enable the wallet holder to have access to a variety of payment instruments. For example the digital wallet may be used to make payments, store ticket information, contain loyalty / coupon information and hold identification and authentication details that enable payments.
The crucial point about mobile wallets is that they are accessed through a mobile device such as a mobile phone or tablet. The digital wallet service may reside on the mobile device itself or it maybe hosted externally on a secure server or on a merchant website. In the last 2 scenarios the mobile device will of course need to access the remote server / website, and this is typically enabled over the internet.
Mobile Point of Sale (mPOS)
mPOS is the ability to make a payment through a mobile device (for example a mobile phone or tablet). This in turn replaces the need to use a traditional point of sale terminal. mPOS devices utilise both software and hardware to enable the processing of the payment. This typically requires some kind of physical hardware such as a dongle or card reader. This essentially enables the mobile phone to act like and become a cash register that you would see at your local supermarket.
Mobile Payments are here to stay!
There are ample examples of mobile payments, mobile wallets and mPOS offerings in the marketplace. You will see daily news releases of one or more products in this space. Today alone Finextra released details of London Buses going cashless, and Bankia unveiling a mobile wallet. For me, to know whats going on you need to understand the objective of the technology and only then can you identify opportunities around how you may utilise it. One thing is for certain, mobile payments are here to stay and will be a key channel through which payments are made both in the SEPA zone and outside of it.
What are your thoughts around mobile payments, mobile wallets and mPOS?